Administrative Remedies and Class Actions

This morning's Supreme Court of Canada decision in AIC Limited v. Fischer, 2013 SCC 69 involved an application of the "preferable procedure" test for certification of class actions to a case in which the Ontario Securities Commission reached a settlement with mutual fund managers about the controversial practice of "market timing".

The question for the Court was whether "certification should be denied on account of results already obtained in a non-litigation proceeding before the OSC" (at para. 17). A significant sum was paid over by virtue of the settlement agreement.

Cromwell J. emphasized the need to look at "non-litigation alternatives" (at para. 20), because "court procedures do not necessarily set the gold standard for fair and effective dispute resolution processes" (at para. 37). But he also noted the need for a rigorous analysis of their process and substance:

[24] There is no doubt that access to justice is an important goal of class proceedings. But what is access to justice in this context?  It has two dimensions, which are interconnected.  One focuses on process and is concerned with whether the claimants have access to a fair process to resolve their claims.  The other focuses on substance — the results to be obtained — and is concerned with whether the claimants will receive a just and effective remedy for their claims if established. They are interconnected because in many cases defects of process will raise doubts as to the substantive outcome and defects of substance may point to concerns with the process.

As to procedure, "the regulatory nature of and the limited participation rights for investors in the OSC proceedings, coupled with the absence of information about how the OSC staff assessed investor compensation, support the conclusion that significant procedural access to justice concerns remain which the proposed class action can address" (at para. 55).

And as to substance, there was expert evidence that only a fraction (albeit a large one) of the sums claimed by the plaintiffs had been secured through the regulatory process. Thus the plaintiffs had "provided an appropriate basis to support the view that the class action proceeding would overcome access to justice barriers that subsisted after the completion of the OSC proceedings and that a cost-benefit analysis supported the conclusion that the class proceedings were the preferable proceeding for the investors to pursue their claims" (at para. 61).

There are the faintest echoes in this analysis of another of Cromwell J.'s recent decisions: Penner v. Niagara (Regional Police Services Board), 2013 SCC 19 (discussed here). There, he refused to apply the doctrine of issue estoppel to a civil lawsuit arising from an incident which had been the subject of a disciplinary complaint:

[47]                          Thus, the text and purpose of the legislative scheme shape the parties’ reasonable expectations in relation to the scope and effect of the administrative proceedings.  They guide how and to what extent the parties participate in the process.  Where the legislative scheme contemplates multiple proceedings and the purposes of those proceedings are widely divergent, the application of the doctrine in such circumstances might not only upset the parties’ legitimate and reasonable expectations but may also undermine the efficacy and policy goals of the administrative proceedings by either encouraging more formality and protraction or even discouraging access to the administrative proceedings altogether.

Interestingly, Cromwell J. there rejected a general (procedural) rule that police discipline complaints should never bar subsequent lawsuits in favour of a (substantive) "case-by-case review of the circumstances to determine whether its [issue estoppel] application would be unfair or unjust"(at para. 35). And as I said in my post on Penner, it should take clear statutory language to deprive individuals who have (or could have) participated in an administrative process of the ability to pursue related private-law claims.